It’s a win-win situation – you cut your tax bill, and a charity gets the money they need to help people in your community as long as you make them to an IRS approved organization, and you itemize your tax deductions when you file.
Here are 8 important tips to be sure your donation is deductible, whether you donate money or tangible property like an automobile, truck, boat or even a golf cart.
1: Make sure you see the 501 (c)(3). If you don’t want the IRS to disallow your deduction, make sure you make your contribution to a qualified charity. The safest bet is to make your donation to a 501 ( c )(3) organization. It has to be a charitable organization – you can’t deduct contributions to individuals, political organizations or people running for office.
2: If you want to deduct, you have to itemize. It’s that simple. You have to file Form 1040 and itemize your deductions on Schedule A.
3: Make sure you subtract what you get from what you give. If the charity you donate to gives you anything in return for your donation, like the free vacation vouchers offered by some charity car donation programs, you need to subtract its worth from the amount of your contribution. Whatever you have left over is the only amount you are allowed to deduct from your taxes.
4: Specific types of donations have specific types of deductions. You can usually value stock or other non-cash property at fair market value. Used household items or clothes usually have to be in pretty good condition if you want to deduct their value. If you’re donating a used vehicle like a car or truck to charity, reputable charities will provide you with the proper paperwork for your tax deduction.
5: If you know the fair market value of your donation, you probably know how much of a tax deduction you can claim. Fair market value is the term used for the price someone who wants to buy property, a vehicle or an item would pay you for it, if both of you have all of the facts of the property, item or vehicle are known and neither of you have any outside pressure to buy or sell. Read more.
6: If you don’t have a record, the IRS won’t play. If the contribution you want to write off is cash, a check or another kind of monetary gift, the IRS requires you to have to have an acceptable record of it. Acceptable records include payroll deduction records, bank records or a written receipt from the charity that includes the name of the charity, the date of your contribution and the amount you donated.
7: The flip side of records. If you make a contribution of cash or property to a charity that is worth $250 or more, you need the same kind of records outlined above. You will need to show a bank statement or record, payroll deduction slips or a receipt showing how much your monetary contribution was, or describing the property you contributed.
- A final note for those with extreme generosity. If you contribute property or items with a value of $5000 or higher you will need to complete Section B of Form 8283. Completing Section B usually means you have to get a professional appraisal.
These tips go for any goods or services you receive when you donate to a charity, whether you get tickets, gift cards, vacation vouchers or merchandise. Subtract what you got from what you gave and you will get your tax deduction. Check out more: https://www.taxreturn247.com.au/how-it-works